How The Presidential Election Is Suppressing MSP Sales

Historically, the economy slows in an election year because markets dislike uncertainty. However, this year’s election has been more uncertain than most with an assassination attempt against the Republican presidential candidate, Donald Trump, and a late candidate swap on the Democratic side for Kamala Harris.

For MSPs, there were some “canary in the coal mine” signs at the end of Q2 indicating you may have to fight harder for new, higher-profitability customers.

Overall, Leads, Opportunities, And Sales Are Down

Data from Service Leadership indicates the rate of growth of MSP sales is slowing down worldwide. The latest Service Leadership figures show that non-private equity-backed MSPs are growing at 6.8% year over year, compared to a 10% growth average over the past 10 years, says Paul Cissel, CEO of Growth Caddie, M&A Expert in Residence for TMT, and a senior analyst and facilitator for Service Leadership. MSPs backed by private equity are doing better, growing at 32.1% year-over-year.

Paul Cissel

Cissel views slower growth as a normal correction, given that during Covid, MSP growth rates reached 25%, an unstainable pace long term. MSPs are still closing deals on a monthly basis, although some more profitably than others, he says.

“Deals are closing but we are coming off of a pretty stellar period during Covid when we were making 25% growth. That post-Covid growth seems to be a confluence of inflation, pricing increases, and the maturing of the MSP outsource message. Now that we’ve come off that sugar high, we’ve come back down to a saner area where we have to really work hard for your business,” Cissel says.

Cissel also noted that most MSP sales historically slow down during election years. Growth in 2012 dropped to 9% from 11% the previous year; in 2016 to 3.6% from 9%; and in 2020 to 5.4% from 8.5%. Then came the pandemic-fueled growth spurt.

But further economic slowdown is possible, and TMT has issued a report with numbers to that effect. The Election Year MSP Market Forecast notes that 63% of MSPs polled “have seen the close rate of proposals and new MSP contracts slowing.” The report further shows that “the average MSP is only closing 23% of the qualified opportunities they get in front of as business owners are ‘holding their breath’ to see what is going to happen with the election before making any decisions.”

The TMT data also shows that the number of inbound leads has dropped by 40%. In January, the average MSP in the TMT program was generating 25 leads per month. By June, that number had dropped to 15 leads on average.

Winners Still Win

In every economic climate, however, there are some businesses that don’t just survive but thrive.

Oli Thordarson

For example, Oli Thordarson, CEO of Alvaka, an MSP in Irvine, California, says he has noticed some nervousness among CEOs and CFOs who are “sitting on their wallets” during this election year. But sales remain unaffected, he says.

Mike Bloomfield, president of Tekie Geek, an MSP in Staten Island, New York, isn’t seeing any slowdown in his business. “Our sales are up, and we are having our best year yet,” he says. “We attribute this growth to the ongoing demand for robust cybersecurity measures and managed IT services as businesses continue to navigate the post-pandemic landscape.”

The same goes for 3rd Element Consulting, an MSP in Mechanicsburg, Pennsylvania. “So far this year, sales are up for us. The political climate hasn’t seemed to affect spend or sales,” says cofounder and CEO Dawn R. Sizer.

RELATED: Survey Says! Secrets To Success During Economic Uncertainties: How MSPs Are Driving Growth In 2024

Market Data Points Up Too

Canalys, an IT industry research firm, has data that points to healthy growth in the MSP market. “Managed services is growing at 12% this year and cybersecurity at 12% as well. When combined, managed security is growing at near 15%,” says Jay McBain, chief analyst, channels, partnerships and ecosystems, at Canalys.

“These are really strong growth rates for MSPs, and the general sentiment is high that these numbers will be achieved even more profitably than last year,” he says.

In its 2024 edition of The Future of IT Survey, Kaseya reports that customer budgets are looking stable. Companies are investing in AI, automation, and cybersecurity. The stability suggests “companies feel better equipped to handle economic challenges and are more optimistic about navigating the uncertainties ahead,” the report says.

While some companies have made slight reductions, Holly Pateman, Kaseya senior vice president of product marketing, attributes this to efficiency. “They’re becoming more efficient with the budget. I think they’re a little more competent with how far their budget will go.”

AI and tool consolidation are the main contributors to increased efficiency, she says. Organizations have dozens of tools available to them to handle cybersecurity, networking gear, endpoint management. and other functions. They can simplify IT management by integrating the tools, she says.

But Economic Concerns Linger

The Kaseya report does note that economic concerns are affecting budget planning for nearly a quarter of organizations. Therefore, it’s extremely important for MSPs to get profitable with what they have now versus trying to sell their way out of a slump. This aligns with Kaseya’s mission to make MSPs more profitable by providing a single platform at a fraction of the price.

Greg Crabtree

Even Thordarson, who is reporting his sales are unaffected so far, admits a market softening may be on the horizon. “I am seeing indications that the financial health of our clients and prospects are not as strong right now as in the recent past. Balance sheets and income statements don’t seem to be as robust, and confidence appears to be waning,” he says.

Greg Crabtree, a financial and profitability expert and author of Simple Numbers, paints a grimmer picture based on the financial metrics his CPA firm, which is a top 25 firm in the US, is seeing in the real-time financial metrics for small and midsize businesses.

Crabtree predicts there is pent-up demand for MSP services right now and does expect an IT spending surge in the first quarter of 2025 once the election is settled. However, he believes that bubble of sales activity will be temporary. He warns that MSPs should brace for a “street fight” economy where they’ll need to metaphorically “punch their competitor in the face to take their client.”

“The market in total is not going to grow,” he says, “which means everybody is going to need to up their game.”

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Author:

Pedro Pereira

Pedro Pereira is a freelance writer in New Hampshire who has covered the IT channel for two decades. 

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